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Path Act Tax Related Provisions

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  • Additionally, the provision authorizes the Tax Court to deposit certain fees into a special fund held by the Treasury Department, with such funds available for the operation and maintenance of the Tax Court.
  • This Alert provides an overview of several important tax provisions affecting businesses and individuals contained in the PATH Act.
  • The recognition period for double taxation of gains after conversion from a C corporation to an S corporation has been permanently reduced to 5 years.
  • Eligible small businesses that pay differential wages-payments to employees for periods that they are called to active duty with the U.S. uniformed services for more than 30 days that represent all or part of the wages that they would have otherwise received from the employer can claim a credit.
  • One state program can be downloaded at no additional cost from within the program.

The PATH Act makes permanent the previously temporary extension of the rule that the applicable percentage must be at least 9% for Low-Income Housing Tax Credits for non-federally subsidized new buildings. Previously, such non-federally subsidized new buildings were required to have had received an allocation of tax credits prior to January 1, 2015 in order for the 9% minimum to apply. The PATH Act strikes this January 1, 2015 limitation, thus making permanent the extension of the 9% minimum credit, which was otherwise set to be of limited use moving forward. The new PATH tax extenders legislation makes the $3,000 threshold permanent for calculating the additional refundable portion of the child tax credit. The provision increases the maximum amount of annual premiums that certain small property and casualty insurance companies can receive and still elect to be exempt from tax on their underwriting income, and instead be taxed only on taxable investment income.

An exception to the rule applies in the case of death and certain transfers of property that qualify for non-recognition treatment. Act law, qualified leasehold improvement property had to be placed in service at least three years after the building itself was placed in service.

Administrative Appeal Relating To Adverse Determinations Of Tax

However, if you file an Earned Income Tax Credit or Additional Child Tax Credit return early in the year, the IRS will hold your refund check until Feb. 15. This means you might not receive your refund until late February. The reason for the possible refund delay for early filers is to provide the IRS with additional time to identify fraudulent claims and to prevent refunds from being paid to identity thieves. The PATH Act was introduced to ensure that all Americans are provided with the correct refund from the Internal Revenue Service by extending expired tax laws and introducing new laws to reduce fraud.

When can I expect my refund with EIC 2020?

The IRS states that 90% of all refunds are issued within 21 days (they have kept their promise in recent years). Most e-file refunds occur within 2 weeks if there are no other issues on the return. Paper filed returns take about two week longer.

One state program can be downloaded at no additional cost from within the program. Online AL, DC and TN do not support nonresident forms for state e-file.

In the case of an individual who is a qualified farmer or rancher for the taxable year in which the contribution is made, a qualified conservation contribution is deductible up to 100 percent of the excess of the taxpayer’s contribution base over the amount of all other allowable charitable contributions. Thus, professional development expenses will only be deductible as an employee business expense on 2015 tax returns, but can move to the front page of the Form 1040 on the 2016 return. At the end of 2014 members of Congress attempted to negotiate a deal to make some of the extenders permanent, but that deal failed to materialize resulting in a bill that, for the most part, extended everything only through December 31, 2014. But this year a deal was reached that took some provisions out of the category of “extenders” and placed them into the tax code without an expiration date. While the delay applies specifically to tax filers claiming the EITC and ACTC, it will affect your entire refund, including refunds based on over withholding or other tax credits. No refund will be made to a taxpayer before February 15 if the taxpayer claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return. This will allow the IRS to verify income reported on those returns since employers are now required to file W-2 forms and 1099s by January 31 .

Highlights of some of these provisions include the following changes. The PATH Act imposes a moratorium on the ACA excise tax on qualified medical devices for two years. The tax will not apply to sales during calendar years 2016 and 2017. The ACA imposes a 2.3 percent excise tax on the sale of certain medical devices by the manufacturer or importer of the device. The FY 2016 omnibus temporarily exempts a certain percentage of transportation costs of qualified independent refiners for purposes of the Code Sec. 199 deduction.

Other Miscellaneous Tax Extenders Provisions Of The Path Act Of 2015

First, small holders of publicly traded USRPHCs generally are not subject to FIRPTA, provided they own no more than five percent of the publicly traded class of stock during an applicable testing period (generally the shorter of five years, or the taxpayer’s holding period). The PATH Act increases the threshold to ten percent in the case of publicly trade REITs. The five percent threshold continues to apply to publicly traded stock of USRPHCs that are not REITs. Extension Of Production Tax Credit For Certain Renewable Electricity Produced By Facilities With Respect To Which Construction Commences By The End Of 2016. The production tax credit is extended for certain renewable sources of electricity to facilities for which construction commences by the end of 2016. Two-Year Extension Of Biodiesel And Renewable Diesel Incentives.

In addition, present law applies the constructive ownership rules of section 318 for purposes of section 512. Thus, a parent exempt organization is deemed to control any subsidiary in which it holds more than 50 percent of the voting power or value, directly (as in the case of a first-tier subsidiary) or indirectly (as in the case of a second-tier subsidiary).

The PATH Act makes permanent that qualified higher education expenses for 529 plans include the purchase of computers, software and internet access. The PATH Act also revises the rules for aggregation and refunds. The PATH Act also makes some taxpayer-friendly changes to ABLE accounts, which are similar to 529 plan accounts for disabled individuals and disability expenses. No longer is the beneficiary required to reside in the state in which the account is created. American Opportunity Tax Credit , a tax credit for qualified education expenses paid for an eligible student for the first four years of higher education, is now permanent. You can get a maximum annual credit of $2,500 per eligible student. Phase out thresholds for single filers is $80,000 and joint filers is $160,000.

Extension Of Energy Efficient Commercial Buildings Deduction (irc §179d, Act §

The provision provides that certain ancillary personal property that is leased with real property is treated as real property for purposes of the 75-percent asset test. In addition, an obligation secured by a mortgage on such property is treated as real property for purposes of the 75-percent income and asset tests, provided the fair market value of the personal property does not exceed 15 percent of the total fair market value of the combined real and personal property. The provision provides that debt instruments issued by publicly offered REITs, as well as interests in mortgages on interests in real property, are treated as real estate assets for purposes of the 75-percent asset test. Income from debt instruments issued by publicly offered REITs are treated as qualified income for purposes of the 95-percent income test, but not the 75percent income test . In addition, not more than 25 percent of the value of a REIT’s assets is permitted to consist of such debt instruments.

The PATH Act extends the exclusion so that it applies to home mortgage debt discharged before January 1, 2017 or discharged pursuant to a binding written agreement entered into before January 1, 2017.See IRC § 108, as amended by PATH Act § 151. The Pension Protection Act of 2006 (“PPA”) provides that the amount of a shareholder’s basis reduction in S stock by reason of a charitable contribution made by the corporation is equal to his pro rata share of the adjusted basis of the contributed property. Prior to the PATH Act, the PPA rule did not apply for contributions made in tax years beginning after December 31, 2014. The PATH Act retroactively and permanently extends the PPA rule.

Can I sue my tax preparer if I get audited?

Since it is your tax returns, it’s your responsibility. When you suspect the tax preparer of misconduct that results in an IRS audit and penalties, you can report them to the IRS for misconduct or sue for damages.

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Visit hrblock.com/halfoff to find the nearest participating office or to make an appointment. The new PATH tax extenders legislation makes the educator expense deduction permanent. For lower-income individuals, who do not even have a $1,000 tax liability, the child tax credit becomes a refundable credit (called the “additional child tax credit”) for 15% of earned income over a threshold amount.

This is of particular interest to itemizers in states that do not impose an income tax. Work opportunity tax credit – Under the PATH Act, the work opportunity tax credit is extended through 2019 and expanded beginning in 2016 to include as a targeted group certain long-term unemployed individuals (i.e., those certified as having been unemployed at least 27 weeks). Employers who contra asset account hire individuals from this new targeted group would be eligible to receive a credit of 40 percent of the first $6,000 in wages paid. The numerous federal tax law changes contained within PATH may impact state corporate income tax computations depending on each state’s adoption of the IRC and/or each state’s decoupling provisions, and the timing attributed to such treatment.

The provision provides for a two-year moratorium on the 2.3-percent excise tax imposed on the sale of medical devices. The provision extends through 2016 the eligibility of domestic gross receipts from Puerto Rico for the domestic production deduction. The Act extends through 2016 the special expensing provision for qualified film, television, and live theater productions. In general, only the first $15 million of costs may be expensed. The PATH Act extends the election to expense mine safety equipment to property placed in service during 2015 or 2016.

The law expands the definition of qualified higher education expenses for which tax-preferred distributions from 529 accounts are eligible to include computer equipment and technology. The penalty may be waived with respect to a particular return or claim for refund on the basis of all facts and circumstances. The preparer must establish that he routinely follows reasonable office assets = liabilities + equity procedures to ensure compliance. The failure to comply with the requirements must be isolated and inadvertent. The enhanced duties of due diligence required with respect to the EITC do not extend to other refundable credits. The provision generally applies to any return of tax, and any amendment or supplement to any return of tax, which is filed after the date of the enactment.

Path Act Tax Related Provisions

Those who have an ITIN are typically not eligible for a Social Security Number. If you are an individual holding an ITIN with the middle digits 83, 84, 85, 86, or 87, you may have recently received a letter from the IRS. This letter is a friendly reminder to keep your ITIN number up-to-date before tax season. Check out H&R Block’s Tax Information Center for more details regarding yourITIN. Similarly, the PATH Act permanently Path Act Tax Related Provisions increases the income phase-out threshold for the Earned Income Tax Credit by $5,000 for those who are married or filing jointly. This means that couples who earned a few thousand dollars more than would have been originally allowed may now be eligible to receive the full EITC for their income bracket. The Child Tax Credit is a $2,000-per-child tax credit given to a taxpaying parent with a dependent child under the age of 17.

In addition, the PATH Act contained certain real-estate related provisions that were not included in the Extenders Bill. These provisions include increasing the withholding rate under FIRPTA on the gross proceeds from the disposition of U.S. real property interests by, and certain distributions payable to, non-U.S. persons from 10% to 15%, effective beginning February 17, 2016, and clarifying the rules for determining whether a REIT or other qualified investment entity is “domestically controlled.” Pre-PATH Act, the dollar limit for Code Sec. 179 expensing for 2015 had reverted to $25,000 with an investment limit of $200,000. The PATH Act permanently sets the Code Sec. 179 expensing limit at $500,000 with a $2 million overall investment limit before phase out .The PATH Act also makes permanent the special Code Sec. 179 expensing for qualified real property and removes the $250,000 cap related to this category of expenditure beginning in 2016.

Path Act Tax Related Provisions

The Protecting Americans from Tax Hikes Act of 2015 includes changes to the tax laws that extend many expiring laws and protect taxpayers against fraud.

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Author: Randy Johnston

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